Authority: High Court of Delhi at New Delhi

Order Date: 16 July 2026

Case Overview

  • Appellant: Turner Morrison Ltd (TML)
  • Respondent: Karma Konchok Namgyal, representing Namgyal Institute for Research on Ladakhi Art and Culture (NIRLAC)
  • Appeal filed under Section 37 of the Arbitration and Conciliation Act, 1996, challenging the Common Arbitral Award dated 31 Oct 2017 (Arbitration I and II) and the Single Judge’s judgment dated 14 May 2020.
  • Core disputes: (i) rate of interest on construction cost (contractually 36% p.a.) and its commencement date; (ii) claim for interest/penalty of 2% per month on outstanding service and electricity charges under the Facilities and Maintenance contracts.

Arbitration I: Interest on Construction Costs

  • Construction Agreement dated 11 Dec 1995 required NIRLAC to pay interest at 36% p.a. on delayed payments.
  • Arbitrator reduced interest to 7.5% p.a. and set the interest commencement date as 20 Jan 2007 (date of demand notice).
  • Single Judge partially set aside the award, holding that the arbitrator could not reduce the contractual rate of 36% but upheld the 20 Jan 2007 commencement date.
  • Court examined the three‑option theory advanced by the arbitrator (recover cost directly, recover via rent adjustment, or recover from lease‑agreement nominees) and found the arbitrator’s interpretation reasonable and not manifestly unreasonable.
  • Court emphasized the limited scope of Section 37 appeals, noting that interference is permissible only if the Single Judge erred on the legal standard or exceeded jurisdiction under Section 34.

Arbitration II: Claim for interest/penalty on service and electricity charges

  • Facilities and Maintenance Contract (15 Oct 1999) and Agreement (29 Nov 2001) contained a default penalty of 2% per month but no explicit interest clause.
  • TML claimed interest at 36% p.a. and alternatively 2% per month compounded as penalty for unpaid service/electricity fees.
  • Arbitrator found no amount due for service/electricity charges, held that the 2% clause was a penalty provision, and applied Section 74 of the Indian Contract Act, 1872 to limit recovery to reasonable compensation, not the penal sum.
  • Single Judge upheld the arbitrator’s view as plausible and did not interfere.

Final Outcome

  • The Delhi High Court held that the Single Judge had not committed any jurisdictional error and had correctly applied the law.
  • The appeal was dismissed in its entirety; no alteration to the interest rate, interest commencement date, or penalty award was made.
  • No cross‑appeal was filed by NIRLAC, so the awarded interest rate of 7.5% p.a. from 20 Jan 2007 remains effective.

Topics: Arbitration, Interest Rate Dispute